Appliance brands hit out at retailers chasing extra layer of profit

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It has been a common complaint in private conversations for some time: the growing desire of retailers to become suppliers, cutting out the brand-name supplier in search of an extra layer of margin, no matter how thin, by importing their own home brand appliances and selling them at extraordinarily aggressive prices.

Up until recently, the response from the suppliers has been mostly muted: considered comments in annual reports and off-the-record remonstrations against such practices. But the recalls have mounted up and the prices have eroded sufficiently for several to now voice serious complaints.

While not mentioning any retailer specifically, Kambrook business manager Adam Tacey has hit out at the glut of cheap appliances on the market, saying that the short termism this practice has created is bad for consumers and the industry.

“Consumers have been conditioned to think that they can buy small appliances for less than a cheap bottle of wine,” Tacey said. “The expectation might be ‘if it lasts for 12 months I’ll be happy’ but in reality, repeated product recalls at the lower end, coupled with safety concerns and performance issues make products from reputable brands like Kambrook a much smarter purchase.”

Tacey’s comments come off the back of news that GAF Control managing director Stuart Foley was looking for buyers for GAF, the once-dominant supplier of third-party house brands to mass retailers like Big W and Kmart.

“Around 25 years ago, when retailers decided that they wanted to have inexpensive appliances in their range, we were there to offer it to them,” Foley said.“The biggest change has been major retailers trying to be importers and every other thing rather than being retailers and getting it all wrong.

“Retailers thought importing directly would save another margin and would result in them having bigger profit margins but it’s caused them a lot of angst.”

According to the ACCC’s Product Recalls page, GAF Control has had four appliance recalls since 2000. This is a decent record when compared to one of its longterm suppliers, Woolworths, which has had seven recalls on its Abode brand alone since May 2011. Abode is the de facto house brand at Big W stores and is sourced by the retailer out of China.

When Appliance Retailer confronted Woolworths about its poor recall record, a spokesperson said:

“All of our Big W products have had to meet relevant Australian regulatory requirements and independent third party checking before they even get to the shelf. Any recalls have been voluntary as part of our internal quality management program. Of course, if any issues come to light, it’s only responsible that we take action and investigate, which is what we have done.”

Kambrook and GAF Control are not alone in voicing their displeasure. Although not as pointed in his comments, outgoing GUD Holdings CEO Ian Campbell said retailers becoming importers was one of the reasons for Sunbeam’s recent profit declines.

“Sunbeam experienced intense competition from retailer house brands and increasing product proliferation,” Campbell said, before also citing the collapse of Retravision Southern as a reason for Sunbeam’s comparatively poor 2013 financial year.

Adam Tacey said that because Kambrook was in this industry “for the long haul”, the brand and its owner The Breville Group were investing more and more resources in durability to make the brand more attractive and to reduce any quality control issues.

“It’s not rocket science,” he said. “We make quality products that are affordable, with features that people genuinely want. And we test the products, again and again. It’s a process we share with consumers to illustrate the lengths that we go to in our durability testing.”

Outside of small appliances, this trend has also proliferated in consumer electronics. Having finalised the purchase of Dick Smith from Woolworths, new CEO Nick Abboud said the famous electronics retailer would have a much higher mix of retailer-sourced house brands, such as the DSE moniker.

Dick Smith’s ‘private label’ brand currently accounts for 10-to-12 per cent of sales, Abboud said at the opening of the retailer’s new flagship Sydney CBD store; a figure that is expected to swell considerably.

“It’s important to be proud of our [private label] brand and we want to move our brand up to 15 to 20 per cent over the next 5 years,” Abboud said. “We’ve just opened up a sourcing office in Hong Kong where we procure that brand…and we’ll bring in about $150 million worth of product through that sourcing office.”

Rod Sims, chairman of the ACCC, has today hit out at retailers sourcing dangerous products directly from China to sell in their stores.

This issue has been bubbling under the surface for some time, especially in the appliance and consumer electronics industries, where the mass market chains have been subject to continual product recalls on home brand products.

“We are concerned by indications that some major retailers appear not to have satisfactory processes in place to meet their responsibility properly to ensure the safety of the goods they sell,” Sims said.

“To avoid contravening the consumer protection laws, retailers need to consider their processes so that they do not put unsafe goods on their shelves.”

“If major retailers are discovered to have taken short-cuts in applying basic quality assurance and control measures, at the expense of consumer safety, we will take action in any way we can.”